Lee on NFTs
Litecoin founder Charlie Lee is no big fan of non-fungible tokens (NFTs), the booming crypto subsector which saw muted growth in the previous but exploded to its current $3.44 billion valuation in the past months.
Lee took to Twitter to explain why he wasn’t a fan. “I see a lot of parallels between 2021’s NFTs with 2017’s ICOs and 2013’s altcoins,” he said.
“Few will hold and have value, most won’t,” said Lee, drawing parallels between NFTs and ICOs.
NFT saw a boom in late-2020 that carried over to 2021. These are, for the uninitiated, a cryptographic representation of tangible and non-tangible objects (such as real estate, digital art, music, among other things), that prove ownership of the rights of whatever is represented.
I see a lot of parallels between 2021’s NFTs with 2017’s ICOs and 2013’s altcoins:
– easy to create new ones with no barriers
– simple to understand & explain
– brings tons of new people into crypto
– high prices & pumps create hype/FOMO
– few will hold & have value, most won’t
The submarket of NFTs has gone ballistic in the past months. The sector’s total value was under $300 million in 2019, grew to over $1 billion in 2020, to its current $3.4 billion. Trading volumes of NFTs have expanded too.
As per Dappradar, the average volume was under $30,000 in March 2020, while today, it reaches tens of millions in a single day alone. The NFTs are going under the hammer for huge amounts too. Several platforms, such as CryptoPunks, basketball-branded NBA Top Shots, and OpenSea, have seen sales of $1 million per NFT in 2021—a move that has attracted criticism from several quarters.
For crypto proponents like Lee, the sudden growth of NFTs is similar to ICOs. In his tweet yesterday, he listed some of these similarities: [that they are] easy to create new ones with no barriers, simple to understand & explain, brings tons of new people into crypto, high prices & pumps create hype/FOMO.
The alarm bells are likely not unfounded either. “DeFi Ted,” an anonymous crypto investor and advisor to insurance project Cover Protocol, shared his experiences with NBA Top Shots in a tweet yesterday, explaining his recent ordeal with the firm’s withdrawal process.
Here is the full break down of my experience with Dapper labs.
— DeFi Ted (Bakes) (@DeFi_Ted) March 2, 2021
He alleged that Top Shots did not respond to withdrawal requests, a point that made DeFi Ted question the project’s solvency.
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